China downgraded its 2019 GDP forecast from 6.5% in 2018 (actual 6.6%) to a range of 6.0-6.5%, the weakest growth rate in 30 years. The major G-10 currencies downgraded themselves on the news. The US dollar opened in New York with gains across the board, but the China news wasn’t the whole story. There was a central bank meeting, major data releases, and of course Trump.
President Trump reportedly is planning to end India’s special trade treatment complaining that India doesn’t provide the US with equitable and reasonable access to their markets.
AUDUSD got knocked lower when China Caixin Services PMI data was weaker than expected. (Actual 51.4 vs forecast 53.8) The damage was exacerbated by China’s GDP growth downgrade which, even at the low end of the forecast is over three times that of Canada and more than double that of the USA. The Reserve Bank of Australia left rates unchanged and continues to forecast 3% growth in 2019. The China data and growth downgrade weighed on NZDUSD which dropped from 0.6826 to 0.6790 and was the worst performing G-10 currency overnight.
USDJPY traded sideways in a 111.73-111.97 range, supported by slightly higher US Treasury yields and broad US dollar strength.
In Europe, EURUSD traded with a negative bias in a narrow 1.1317-1.1340 range. However, losses were limited by better than expected Eurozone January Retail Sales (Actual 2.2% vs forecast 1.9%) and Services PMI data. (Actual 52.8 vs forecast 52.3) Traders are also patiently awaiting Thursday’s ECB meeting results.
GBPUSD got a lift from higher than expected Services PMI (Actual 51.3 vs forecast 49.9). However, the rally was short-lived. GBPUSD opened at the bottom of its 1.3152-97 range.
USDCAD continues to lick its wounds from Friday’s weak GDP report with bullish technicals and broad US dollar strength adding to its woes. Wednesday’s Bank of Canada policy statement is unlikely to provide any support to the beleaguered currency.
The US dollar may get additional support if ISM Non-manufacturing index is higher than predicted. (Forecast 57.3 vs previous 56.7) There isn’t any Canadian data available.
USDCAD Technical Outlook
The intraday USDCAD are bullish. The break of 1.3310 opens the door to a test of resistance in the 1.3350-80 area. If broken, there isn’t a lot of resistance until 1.3510, which guards 1.3660. For today, USDCAD support is at 1.3310 and 1.3280. Resistance is at 1.3350, 1.3380.
Today’s Range 1.3310-80